The Madras High Court has held that threat of Non-Performing Asset (NPA) classification by consortium lenders is no ground to recall attachment, particularly when judgment debtors had demonstrated the ability to mobilise Rs. 120 Crores within two weeks under Supreme Court pressure. The Court explained that where judgment debtors seek modification of an interim order of attachment passed in execution of a foreign arbitral award on the strength of a quarterly payment undertaking, the court may decline such modification if the affidavits in support are vague, the source of funds is not disclosed despite specific directions, and the conduct demonstrates an attempt to protract execution.
The threat of asset classification as non-performing assets by consortium lenders cannot, by itself, justify recalling or keeping in abeyance an order of attachment, particularly when the judgment debtors have previously demonstrated the ability to mobilise substantial funds under judicial pressure, added the Court.
Accordingly, the application by SEPC Limited (second Judgment Debtor) to modify the order dated Feb 19, 2026, directing interim attachment of trade receivables to the tune of Rs. 154.63 crores were dismissed. Further, the undertaking by the first Judgment Debtor (GPE India Ltd.) to pay Rs. 7.50 Crores per quarter, without disclosing the source of funds despite repeated specific directions, was held insufficient to warrant modification.
A Single Judge Bench comprising Justice K. Kumaresh Babu observed that the application was essentially an attempt to nullify the effect of the order dated Feb 19, 2026, and was being pursued by the second Judgment Debtor in collusion with the first Judgment Debtor to deny the Award Holder the fruits of the decree. The Court noted that it was not clear why the first Judgment Debtor, on whose undertaking the application was founded, had not itself come forward with the application.
The Court further observed that the conduct of the first Judgment Debtor was not bonafide, as it had filed vague affidavits despite specific directions to disclose the source of funds, and had made bald assertions about ongoing negotiations without any substantiation. Even after a quarter had elapsed from the order dated April 30, 2026, neither the source of Rs. 7.50 Crores nor any further amount to substantiate bonafides had been placed on record. The Court therefore held that the attempt was only to protract the proceedings and not allow the Award Holder to enjoy the fruits of the decree.
The Court further observed that it could not bow down to the intimidation that the Judgment Debtors would be classified as NPAs if the attachment order continued, particularly when the order dated Feb 19, 2026, had recorded a finding that the Judgment Debtors, with the Damocles sword hung by the Supreme Court, had within a short span of two weeks paid a substantial sum of Rs. 120 Crores.
Briefly, SEPC Limited (formerly Shriram EPC Limited), the applicant and the second Judgment Debtor, filed an application before the Madras High Court seeking modification of the order dated Feb 19, 2026, which had directed interim attachment of trade receivables of the second respondent (GPE (JVI) Ltd.) to the tune of Rs. 154.63 crores towards satisfaction of an Arbitral Award dated Jan 07, 2021, out of total trade receivables of Rs. 499.62 crores.
The first respondent, GPE (India) Ltd. (first Judgment Debtor), undertook to deposit Rs. 7.50 Crores per quarter until the entire award amount was paid, and further undertook to deposit Rs. 2.50 Crores within 15 days as a show of bonafides. The applicant contended that the attachment order had brought its business to a standstill, risked classification of its assets as a non-performing asset (NPA), delayed monthly salary disbursals of Rs. 2.08 Crores, and that trade receivables were working capital required to be re-infused into projects rather than profits. The first Judgment Debtor also undertook to indemnify the second Judgment Debtor against any recovery under the Award.
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The Award was originally passed on Jan 07, 2021, affirmed by the Singapore International Commercial Court on Dec 24, 2021, and declared executable as a decree of the Madras High Court on Jan 05, 2023, under Sections 47 to 49 of the Arbitration and Conciliation Act. After orders of the Supreme Court, the Judgment Debtors paid Rs. 120 Crores. By order dated April 16, 2026, the Court directed filing of an affidavit specifying the source of funds. Further, by order dated April 30, 2026, consortium banks were permitted to appropriate Rs. 15.69 Crores from trust and retention accounts and Rs. 2 Crores for salary, while the first Judgment Debtor was directed to deposit Rs. 2.50 Crores by way of Fixed Deposit in the name of the Registrar General and file an affidavit disclosing the source of funds for the quarterly payments.
An independent audit agency, PriceWaterhouseCoopers, was appointed and filed its Report on April 22, 2026. Despite repeated directions, the affidavit dated June 19, 2026, merely stated that the first Judgment Debtor was engaged in negotiations with prospective corporates for availing loan facilities, without disclosing any source of funds. After arguments were reserved on June 29, 2026, a further affidavit was filed on Aug 30, 2026, undertaking to deposit the entire settlement amount by Oct 31, 2026, but again without disclosing the source of funds.
